On 29/01/10, the Federal Deposit Insurance Corporation closed six banks: First National Bank of Georgia, Carrollton, GA; Florida Community Bank, Immokalee, FL; Marshall Bank, N.A., Hallock, MN; Community Bank & Trust, Cornelia, GA; First Regional Bank, Los Angeles, CA; and American Marine Bank, Bainbridge Island, WA. The assets of the closed banks were $5,531,200,000 and insured deposits were $4,896,600,000. The cost to the FDIC is estimated at $1,875,760,000.
According to our methodology, the recoverable value of the banks was only 54.61% of the declared asset value. This makes the recoverability of this week's closures distinctly below the cumulative recoverability since December of 2007, which stands at 57.66% (down slightly from last report's 57.69%).
Cumulative cost-to-FDIC so far in the Depression was brought to $59,643,720,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $555,373,580,000, and total FDIC-insured deposits to $379,858,150,000. The recoverable value of all failed banks was only $320,214,430,000 (57.69% of the declared value).
* * *
Once again the FDIC has pulled out a new trick: this week is was an "equity appreciation instrument," taken as "consideration for the transaction" of Florida Community Bank. We assume this means stock. If we're right, then it is simply another method by which the FDIC is extending store credit to acquiring institutions. What makes the situation seem all the more strange, is that the acquirer of Florida Community was a bank which was formed just last week: Premier American Bank, N.A., which purchased the failed Premier American Bank, with a "cash participant instrument" in the transaction.
Hmm... We have not heard back from the FDIC on our enquiry about the terms of the cash participant instrument, so we cannot conjecture about what exactly is going on. In general, however, we have to seriously question what the hell the FDIC is thinking: it is not only extending credit, but extending it to a newly-formed bank in two different forms within two weeks, potentially involving upwards of $850 million in assets. If the FDIC gave generous credit to Premier American - for example, only 10% downpayment or so - that's a lot of leverage for an institution, whose predecessor showed itself less than reliable.
We will still try to get more information from the FDIC about these instruments thrown about recently. If we do get something useful, we'll try to make better sense of the situation.
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no weighting with assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Minnesota
5. Utah
6. Kansas
7. Oregon
8. Missouri
9. Florida
10. Washington (replacing Arizona)
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (39.81%, up from 39.38%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.13%, up from 45.06%)
5. Nevada (49.81%)
6. Ohio (50.84%)
7. Washington (55.25%, up from 54.11%)
8. Georgia (55.33%, up from 54.64%)
9. North Carolina (56.70%)
10. Maryland (56.90%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $1,875,760,000. The value now stands at $36,302,620,000.
Saturday, January 30, 2010
Wednesday, January 27, 2010
FDIC Bank Failure Report - Extra Late Edition
On 22/01/10, the Federal Deposit Insurance Corporation closed five banks: Premier American Bank, Miami, FL; Bank of Leeton, Leeton, MO; Charter Bank, Santa Fe, NM; Evergreen Bank, Seattle, WA; and Columbia River Bank, The Dalles, OR. The assets of the closed banks were $3,159,500,000 and insured deposits were $2,637,600,000. The cost to the FDIC is estimated at $546,210,000.
According to our methodology, the recoverable value of the banks were only 66.19% of the declared asset value. This makes the recoverability of this week's closures distinctly above the cumulative recoverability since December of 2007, which stands at 57.69% (up slightly from last report's 57.64%).
Cumulative cost-to-FDIC so far in the Depression was brought to $57,767,960,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $549,842,380,000, and total FDIC-insured deposits to $374,961,550,000. The recoverable value of all failed banks was only $317,193,590,000 (57.69% of the declared value).
* * *
We noticed with a handful of these latest closures, that the FDIC has "acquire[d] a cash participant instrument," adding that "[t]his instrument serves as additional consideration for the transaction." At present we assume this means the FDIC is providing financing for the acquiring bank; in essence, the Government is giving store credit for the assets of dead banks. How this is a good idea, we really don't know, but we can only assume the regulatory geniuses at the FDIC have a firm grasp on things.
If indeed the FDIC is extending store credit to acquirers, we posit this means the bank catastrophe in the United States has entered a new phase of... well, catastrophe. Not only did the assets of Evergreen and Premier American start rotting when exposed to oxygen, they were so horrible the FDIC had to give financing to get rid of the muck. "Here, take the assets for awhile and give them a try in your books," the regulators must have told the acquirers; "we're so confident you'll love them, you don't even have to give us a down-payment." If those acquiring bank had had any self-respect, they would have run away screaming.
Once again we can't help but to think that the FDIC is setting itself up for a world of hurt. By extending store credit - if indeed that is what the "cash participant instrument" is - the FDIC is betting that a recovery will help strengthen the acquiring institutions sufficiently, that sucking up the full cost of the filth they bought on credit will not, in turn, cause them to croak. Instead, we're quite convinced by this move that a major bank failure is in the works, whether or not the FDIC is aware of it. If bank assets have gotten to the point where they have to be force-fed, then there's a big bank out there loaded to the gunwales with toxic sludge. The questions are: which bank, and when? Alas, dear Reader, we have no answers.
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no weighting with assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Minnesota
5. Utah
6. Kansas
7. Oregon (up from #9)
8. Missouri
9. Florida (down from #7)
10. Arizona
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (39.38%, up from 38.89%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.06%)
5. Nevada (49.81%)
6. Ohio, up from #7 (50.84%)
7. Washington, down from #6 (54.11%, up from 50.62%)
8. Georgia (54.64%)
9. North Carolina (56.70%)
10. Maryland (56.90%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $546,210,000. The value now stands at $38,178,380,000.
According to our methodology, the recoverable value of the banks were only 66.19% of the declared asset value. This makes the recoverability of this week's closures distinctly above the cumulative recoverability since December of 2007, which stands at 57.69% (up slightly from last report's 57.64%).
Cumulative cost-to-FDIC so far in the Depression was brought to $57,767,960,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $549,842,380,000, and total FDIC-insured deposits to $374,961,550,000. The recoverable value of all failed banks was only $317,193,590,000 (57.69% of the declared value).
* * *
We noticed with a handful of these latest closures, that the FDIC has "acquire[d] a cash participant instrument," adding that "[t]his instrument serves as additional consideration for the transaction." At present we assume this means the FDIC is providing financing for the acquiring bank; in essence, the Government is giving store credit for the assets of dead banks. How this is a good idea, we really don't know, but we can only assume the regulatory geniuses at the FDIC have a firm grasp on things.
If indeed the FDIC is extending store credit to acquirers, we posit this means the bank catastrophe in the United States has entered a new phase of... well, catastrophe. Not only did the assets of Evergreen and Premier American start rotting when exposed to oxygen, they were so horrible the FDIC had to give financing to get rid of the muck. "Here, take the assets for awhile and give them a try in your books," the regulators must have told the acquirers; "we're so confident you'll love them, you don't even have to give us a down-payment." If those acquiring bank had had any self-respect, they would have run away screaming.
Once again we can't help but to think that the FDIC is setting itself up for a world of hurt. By extending store credit - if indeed that is what the "cash participant instrument" is - the FDIC is betting that a recovery will help strengthen the acquiring institutions sufficiently, that sucking up the full cost of the filth they bought on credit will not, in turn, cause them to croak. Instead, we're quite convinced by this move that a major bank failure is in the works, whether or not the FDIC is aware of it. If bank assets have gotten to the point where they have to be force-fed, then there's a big bank out there loaded to the gunwales with toxic sludge. The questions are: which bank, and when? Alas, dear Reader, we have no answers.
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no weighting with assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Minnesota
5. Utah
6. Kansas
7. Oregon (up from #9)
8. Missouri
9. Florida (down from #7)
10. Arizona
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (39.38%, up from 38.89%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.06%)
5. Nevada (49.81%)
6. Ohio, up from #7 (50.84%)
7. Washington, down from #6 (54.11%, up from 50.62%)
8. Georgia (54.64%)
9. North Carolina (56.70%)
10. Maryland (56.90%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $546,210,000. The value now stands at $38,178,380,000.
Friday, January 22, 2010
Analysis: U.S. Supreme Court Campaign Finance Decision
Is it not remarkable, dear Reader, that mere days after Republican Scott Brown upsets the U.S. Senate special election (and Obama Administration referendum), that the U.S. Supreme Court made a landmark ruling, rolling back campaign finance and anti-corruption efforts? The case was two-fold, as far as we can tell, in its implications: first, it holds time-based bans upon corporate political advertising and politicking (namely, preventing those interests from advertising too near an election day); second, it frees corporations and other such interests to make direct contributions to political candidates, rather than filtered through special interest groups. The decision was leveraged upon the First Amendment of the U.S. Constitution, suggesting that restricting corporations from doing the aforementioned activities was impinging upon freedom of speech.
This actually does have coherence, as we understand it: corporations are considered an individual under corporate law, legally on par with an actual living human being, such as yourself. So, in essence, yes, a corporation does have just as much of a right to contribute and politick for its candidate of choice as you; that they have vastly more money to throw around than you is really trivial. At least, it's trivial to the Supreme Court. The full implication of the decision perhaps did not sink into justices' thoughts as cast their votes. Let us explain:
Consider the organisation known as Goldman Sachs, everyone's favourite vampire squid. As a financial institution, Goldman can borrow an effectively unlimited amount of money from the Federal Reserve, and then turn around and invest that money into something which pays a guaranteed return. At present, much of that would seem to be Treasury Bills; in essence, Goldman Sachs permits the Federal Government to borrow from itself, but make it look otherwise, and make a profit at the same time. This cozy little arrangement, along with all the other cozy little arrangements Goldman has, seems to make a lot of people very angry. Now, let's say that a vociferous group of contenders for Congress run on a "let's shut down all the big banks" platform, and experience massive support from across the U.S.
The Lord's work would seem to be in jeopardy, no? At that point, is it not a good investment to borrow, say, $25 billion from the U.S. Treasury, and invest that in supporting the candidates who are on the "let's keep Wall Street bonuses flowing" platform? The 'return' off of that 'investment' is not necessarily quantifiable, but it is indeed qualifiable: Goldman Sachs continues to survive. That, perhaps, is the best investment that Goldman could have made with someone else's money.
We point out there is no longer any reason whatsoever that Goldman cannot do this exact manoeuvre during the 2010 Congressional elections. Nor, indeed, does anything prevent JPMorgan Chase from doing the same thing, or Citigroup, or Wells Fargo, and the rest of the too-big-to-fail crowd. Heck, the Federal Reserve System itself could start running advertising if it wanted to! Call us alarmist? Please feel free. But remember that there is nothing which will prevent this from happening.
If anyone notices how momentous this decision was, we have no doubt there will be efforts of dressing it up as a good thing; consider this hatchet piece from the Atlantic. However, in our opinion the Court has simply handed over near-total political control of the U.S. Government to large corporate interests on a silver platter. That situation is perhaps nothing new per se - consider Goldman Sachs' apparent ownership of the U.S. Treasury - but it is much, much more of the status quo, and additionally set in concrete. Going forward, we fear there will forever be a shrinking ability of small interests (e.g. individuals, small entrepreneurs, et cetera) in getting their message to their supposed representatives in Government. That could change, as an aside, if the apportionment lawsuit in Mississippi is actually successful, but the outcome of that case is far from certain.
What is certain is that the large corporations which will exploit this Supreme Court ruling will do so to the hilt, because the Depression puts their very survival at stake. Without even the most ineffective of legal restraint on their politicking, we would not be the least bit surprised if more and more high-level officials in the Government come from super-huge banks and large corporate interests, like the defence industry and healthcare, et cetera. Put simply, the sovereignty of the United States has been transferred, de jure, from the American Citizenry, to the largest and most powerful corporations. The Government must and will respond accordingly.
What this will mean for American Citizens trying to scrape their way through the Depression is fairly easy to predict. The average American will feel the pain, because he or she will be forcibly squeezed of their wealth, for the benefit of these corporate interests. The U.S. Government will continue to everything it can in order to reinforce the existence of those institutions which ethically should be left to die. The cost of these corporatist heroics will come in the forms of more bailouts, more Government largesse, higher taxes, higher inflation, and more destruction of the non-corporatised economy.
This actually does have coherence, as we understand it: corporations are considered an individual under corporate law, legally on par with an actual living human being, such as yourself. So, in essence, yes, a corporation does have just as much of a right to contribute and politick for its candidate of choice as you; that they have vastly more money to throw around than you is really trivial. At least, it's trivial to the Supreme Court. The full implication of the decision perhaps did not sink into justices' thoughts as cast their votes. Let us explain:
Consider the organisation known as Goldman Sachs, everyone's favourite vampire squid. As a financial institution, Goldman can borrow an effectively unlimited amount of money from the Federal Reserve, and then turn around and invest that money into something which pays a guaranteed return. At present, much of that would seem to be Treasury Bills; in essence, Goldman Sachs permits the Federal Government to borrow from itself, but make it look otherwise, and make a profit at the same time. This cozy little arrangement, along with all the other cozy little arrangements Goldman has, seems to make a lot of people very angry. Now, let's say that a vociferous group of contenders for Congress run on a "let's shut down all the big banks" platform, and experience massive support from across the U.S.
The Lord's work would seem to be in jeopardy, no? At that point, is it not a good investment to borrow, say, $25 billion from the U.S. Treasury, and invest that in supporting the candidates who are on the "let's keep Wall Street bonuses flowing" platform? The 'return' off of that 'investment' is not necessarily quantifiable, but it is indeed qualifiable: Goldman Sachs continues to survive. That, perhaps, is the best investment that Goldman could have made with someone else's money.
We point out there is no longer any reason whatsoever that Goldman cannot do this exact manoeuvre during the 2010 Congressional elections. Nor, indeed, does anything prevent JPMorgan Chase from doing the same thing, or Citigroup, or Wells Fargo, and the rest of the too-big-to-fail crowd. Heck, the Federal Reserve System itself could start running advertising if it wanted to! Call us alarmist? Please feel free. But remember that there is nothing which will prevent this from happening.
If anyone notices how momentous this decision was, we have no doubt there will be efforts of dressing it up as a good thing; consider this hatchet piece from the Atlantic. However, in our opinion the Court has simply handed over near-total political control of the U.S. Government to large corporate interests on a silver platter. That situation is perhaps nothing new per se - consider Goldman Sachs' apparent ownership of the U.S. Treasury - but it is much, much more of the status quo, and additionally set in concrete. Going forward, we fear there will forever be a shrinking ability of small interests (e.g. individuals, small entrepreneurs, et cetera) in getting their message to their supposed representatives in Government. That could change, as an aside, if the apportionment lawsuit in Mississippi is actually successful, but the outcome of that case is far from certain.
What is certain is that the large corporations which will exploit this Supreme Court ruling will do so to the hilt, because the Depression puts their very survival at stake. Without even the most ineffective of legal restraint on their politicking, we would not be the least bit surprised if more and more high-level officials in the Government come from super-huge banks and large corporate interests, like the defence industry and healthcare, et cetera. Put simply, the sovereignty of the United States has been transferred, de jure, from the American Citizenry, to the largest and most powerful corporations. The Government must and will respond accordingly.
What this will mean for American Citizens trying to scrape their way through the Depression is fairly easy to predict. The average American will feel the pain, because he or she will be forcibly squeezed of their wealth, for the benefit of these corporate interests. The U.S. Government will continue to everything it can in order to reinforce the existence of those institutions which ethically should be left to die. The cost of these corporatist heroics will come in the forms of more bailouts, more Government largesse, higher taxes, higher inflation, and more destruction of the non-corporatised economy.
North American Housing Price Report for January
Our North American Housing Price Index registered a modest 1.67% increase from December, supported by a rise at the bottom of the market. The drop from May - when we started the Index - is now 14.46%, representing a massive fall in the North American housing markets, and likely correlated by a similar drop in the valuation of bank mortgage portfolios. On an annualised basis the Index suggests the market is down 21.69%, a truly stunning loss.
In the United States, IRS requirements have made claiming the house purchase tax credit rather arduous. This will put a damper on the 'no-money-down' schemes that were being used to have the tax credit stand in for a down payment. Apparently government-backed loans are now about 90% of the market in the US and essentially all in Canada (where many borrowers are having the nasty surprise of balloon notes coming due without any means to refinance them).
The cumbersome tax credit, along with the spectre of interest rate hikes in the future - thus influencing the interest rate on mortgages - will likely collude to continue depressing house prices across the continent. Simply put, the North American housing market is now stuck wheezing in the cold, heavy iron-lung of the state. The crash may be very prolonged, with Governments desperately attempted to prop up prices which should be falling.
In the United States, IRS requirements have made claiming the house purchase tax credit rather arduous. This will put a damper on the 'no-money-down' schemes that were being used to have the tax credit stand in for a down payment. Apparently government-backed loans are now about 90% of the market in the US and essentially all in Canada (where many borrowers are having the nasty surprise of balloon notes coming due without any means to refinance them).
The cumbersome tax credit, along with the spectre of interest rate hikes in the future - thus influencing the interest rate on mortgages - will likely collude to continue depressing house prices across the continent. Simply put, the North American housing market is now stuck wheezing in the cold, heavy iron-lung of the state. The crash may be very prolonged, with Governments desperately attempted to prop up prices which should be falling.
Wednesday, January 20, 2010
U.S. Politics: Massachusetts and the Fall of Obama
The U.S. Senate special election in Massachusetts is over, and it seems that Republican Scott Brown has trounced the Democratic-hopeful Martha Coakley, 52 to 47, with 80% of the votes counted. We wonder where all the 'non-standard' voters went, notably the ones centred around the Libertarian candidate Joseph Kennedy, but we can only assume his supporters were merely lying about supporting him. Undoubtedly, the Libertarians politely and neatly divided their votes between Ms. Coakley and Mr. Brown, in the noble interest of maintaining an entrenched two-party system, but we digress. As the Agence France-Presse states:
[Brown] pulled off a surprise victory late Tuesday, capturing the seat of the late Democratic icon Edward Kennedy in a stinging setback to President Barack Obama exactly a year after he swept into office.
Note the "stinging setback" comment; this is so very much a vast understatement, we can't help but giggle. Most immediately, it suggests the damage control efforts over the Democrats' face-plant in Massachusetts is already underway, because this was not just a set-back, in our opinion, but a major blow to the efforts of the Obama Administration to continue with its agenda - whatever that might be. If Senator-elect Brown makes good his promise to vote against the Obama mandatory healthcare proposal, it will cement the appearance of the Democrats as being not only non-responsible to their power base, but also impotent in the face of a Republican minority.
Senator-elect Brown's vote is vital in the mandatory healthcare, either in passing or rebuffing the legislation, so he will find himself very popular with many people when he arrives in Washington D.C. The Republicans will want him to vote against the mandatory healthcare bill; the Democrats will court him to honour Ted Kennedy's 'legacy' by passing the bill; lots of pretty, well-dressed people representing healthcare interests will give him bags of money, whilst Mr. Brown 'thinks' about his vote. Frankly, we do not envy him; that level of 'popularity' does not sit well on our conscience.
We also wouldn't be surprised if he's just another turncoat, as well, given the following quote:
"I never said I was going to do everything I can to stop health care. I believe everybody should have health care, it's just a question of how we do it."
Using our previous idea of all the people who want to be Senator-elect Brown's 'friend,' this statement can be understood in three different ways. First, a comment to his fellow Republicans, to not reject out of hand a concept - universal health insurance - just because the Democrats want it. Second, an olive leaf to the Democrats, indicating he's willing to listen to and compromise on their agenda and his own. Thirdly, a cue to the healthcare interests, that he can be bought for sufficient campaign contributions, fancy dinners, and expensive trips, et cetera. Which of the three is in process? Hmm, pick one, dear Reader, or perhaps all three; time will tell, when Mr. Brown takes his seat - or, as he put it, "the people's seat."
But Senator-elect Brown is merely the figurehead for a deeper trend ongoing in the Obama Administration: the rising realisation in Obama voters, that they have been unequivocally 'had,' taken for a ride, bamboozled, and so forth. Throughout several articles, describing the upset Republican victory, we see numerous mentions to "tides of anger" amongst voters, "propelling" Mr. Brown to his victory. Hmm, interesting word choices there, we think; especially since "anger" is quickly followed by "economic recovery," "healthcare," "bank bailouts," "automaker bailouts," et cetera. Could it be the American Citizenry is finally waking up to the cold, harsh reality, that Barack Obama the reformer was a fraud? Are they beginning to wipe the crusts of knee-jerk, feel-good, anti-establishment hysteria from their eyes, only to see Barack Obama, defender of the status quo?
The shocking turn-about of a quintessentially Democratic State (i.e. Massachusetts), in voting a Republican to its Senate seat, suggests this is indeed ongoing. Despite the spin-control which we are highly confident will arise, this blow is acute in its severity to the Democratic agenda, and symbolic for the American Citizenry's faith in the Obama Administration. For an example of that spin, consider AFP's comment, "a freshman president's party loses congressional seats anyway in his first midterm elections..." This is a misnomer, because the Massachusetts election was not a midterm; it was a special election, which necessarily turns into a referendum on the Government, and the Administration. This it was, and to us the results are conclusive: the Administration is losing standing.
The loss of faith in the Administration is not helped by the flip-flopping of one President Obama, on whether or not to personally support Ms. Coakley's flailing campaign. As memory serves, the White House insisted he wasn't going to visit Massachusetts, then it was announced he was, then he cancelled, and then finally he made an appearance, 36 hours before the polls opened. This does not make him seem a strong, capable, dedicated leader; the leader which his supports thought they were electing. Instead, they show him how he truly is: vacillating, feckless, and without an understanding of what is needed in a President to run an effective Government. Heretofore, that same Government has been a relatively docile and obedient one, too - if he cannot be effective with a Government tightly controlled by his own party, how will he appear when the Senate has an empowered, and dangerous, Republican filibuster? What about when the Congress goes up for midterm elections later on in the year, and the Democrats either loose their strong lead, or even become the minority party?
This, we think, is at last the first signs of what we predicted, as soon as Mr. Obama was sworn into the Presidency: he is the Herbert Hoover of the 2007 Depression. Both Presidents came into office extremely popular, and quickly suffered a massive economic calamity; Hoover was quickly regarded as being incompetent and ineffective in his treatment of the 1929 Depression, became a lame-duck, and left the Presidency after one term, in total disgrace. So to, we think, shall go the fortunes of Mr. Obama: the tides of popular opinion will turn against him, his party will lose control of the Government, and he will be, at the end of his single term, a disgrace. As this unfolds, we suspect the irony of this photograph will become iconic in the twilight years of the Obama Presidency (source):
Tuesday, January 19, 2010
FDIC Bank Failure Report - Late Edition
On 15/01/10, the Federal Deposit Insurance Corporation closed three banks: Town Community Bank & Trust, Antioch, IL; St. Stephen State Bank, St. Stephen, MN; and Barnes Banking Company, Kaysville, UT.The assets of the closed banks were $922,100,000 and insured deposits were $877,300,000. The cost to the FDIC is estimated at $296,300,000.
According to our methodology, the recoverable value of the bank was only 63.01% of the declared asset value. This makes the recoverability of this week's closure distinctly above the cumulative recoverability since December of 2007, which stands at 57.64% (essentially unchanged from last report's 57.63%).
Cumulative cost-to-FDIC so far in the Depression was brought to $57,221,740,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $546,682,880,000, and total FDIC-insured deposits to $372,323,950,000. The recoverable value of all failed banks was only $315,102,210,000 (57.64% of the declared value).
* * *
We don't have much to say about these closures, other than to note that the FDIC was forced to create a Deposit Insurance National Bank to facilitate the liquidation of the failed Barnes Banking Company. What this means, of course, is that Barnes was so rank the FDIC could not possibly slather enough perfume on it to cover up the stench. No other institutions found Barnes to be agreeable as a dance partner, as it were, so the FDIC was left with the corpse. We suspect that Barnes' assets will end up in a future Multibank Structured Transaction, like the $1.02 billion of rotting assets recently auctioned off, for 22 cents on the dollar.
We'd love to see the entire U.S. banking system priced as realistically as that MST!
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no weighting with assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Minnesota (up from #5)
5. Utah (up from #6)
6. Kansas (down from #4)
7. Florida
8. Missouri
9. Oregon
10. Arizona
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (38.89%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.06%)
5. Nevada (49.81%)
6. Washington (50.62%)
7. Ohio (50.84%)
8. Georgia (54.64%)
9. North Carolina, up from #10 (56.70%)
10. Maryland, new to list (56.90%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $296,300,000. The value now stands at $38,724,590,000.
According to our methodology, the recoverable value of the bank was only 63.01% of the declared asset value. This makes the recoverability of this week's closure distinctly above the cumulative recoverability since December of 2007, which stands at 57.64% (essentially unchanged from last report's 57.63%).
Cumulative cost-to-FDIC so far in the Depression was brought to $57,221,740,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $546,682,880,000, and total FDIC-insured deposits to $372,323,950,000. The recoverable value of all failed banks was only $315,102,210,000 (57.64% of the declared value).
* * *
We don't have much to say about these closures, other than to note that the FDIC was forced to create a Deposit Insurance National Bank to facilitate the liquidation of the failed Barnes Banking Company. What this means, of course, is that Barnes was so rank the FDIC could not possibly slather enough perfume on it to cover up the stench. No other institutions found Barnes to be agreeable as a dance partner, as it were, so the FDIC was left with the corpse. We suspect that Barnes' assets will end up in a future Multibank Structured Transaction, like the $1.02 billion of rotting assets recently auctioned off, for 22 cents on the dollar.
We'd love to see the entire U.S. banking system priced as realistically as that MST!
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no weighting with assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Minnesota (up from #5)
5. Utah (up from #6)
6. Kansas (down from #4)
7. Florida
8. Missouri
9. Oregon
10. Arizona
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (38.89%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.06%)
5. Nevada (49.81%)
6. Washington (50.62%)
7. Ohio (50.84%)
8. Georgia (54.64%)
9. North Carolina, up from #10 (56.70%)
10. Maryland, new to list (56.90%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $296,300,000. The value now stands at $38,724,590,000.
Thursday, January 14, 2010
Pondering Orlov's Five Stages of Collapse
Dmitry Orlov blogged an interesting piece entitled The Five Stages of Collapse. It's well worth a read if you can tolerate doomer porn. The best part is the five-stage model itself. His notion is that social collapse follows five progressive steps, and that although collapse may be arrested at any one of the stages, each stage leads to the next one - a progressive breakdown, if you will.
Happily for us civilised folks, collapse usually is arrested before it progresses very far. In wealthy, developed countries even if this Depression turns out to be a doozey, and the first of many more to come, odds are it won't take us very far down the path of social disintegration. We would like to justify this optimistic opinion using Mr. Orlov's own model.
Orlov's first stage is Financial Collapse: "Financial institutions become insolvent; savings are wiped out, and access to capital is lost." This is what most of the world (China excepted, perhaps having a reprieve for the moment due to its many bubbles) is experiencing at present.
We agree with Orlov that governmental policy is not favourable to arresting this stage, and what will come next is what he terms Commercial Collapse: "Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down, and widespread shortages of survival necessities become the norm."
If hyperinflation takes hold because unsupportable debts are monetised, then this scenario may very well play itself out as Orlov describes it.
On the other hand, if the USA and other rich economies maintain non-hyperinflating currencies, the combined result of unsupportable debts and misguided government policies will be catastrophic loss of household income. Goods may not become scarce, but the means to purchase them will.
In either case, whatever government may decide to do or not do about the situation, the people themselves can arrest Commercial Collapse by any number of actions to ensure the continuing flow of goods and services. The so-called informal economy of legal goods and services delivered 'under-the-table' already provides one template for a popular, self-organising market. Many civic organisations such as churches, clubs, co-ops and farmer's markets can operate as clearinghouses. Barter banks and scrip systems of 'bona fide' money can spring up where they do not already exist. Thus the solution to arresting Commercial Collapse absent highly-unlikely, successful government intervention, is for people to set themselves up very much in community, and to become a lot more creative than they are used to.
We suspect that enough people can rise to the occasion. Only a tiny vanguard of creative types is needed to successfully establish functional patterns of mostly-local commerce.
It should be noted that under this scenario, Commercial Collapse would be arrested at a level of affluence that is only a fraction of what most inhabitants of the World's developed countries are used to. It won't be an easy adjustment by any means. Two classes of persons are most vulnerable: the poorest members of society who lack work and social skills; and affluent members who derive their livelihoods from access to those institutions which are not likely to survive the Commercial Collapse.
Happily for us civilised folks, collapse usually is arrested before it progresses very far. In wealthy, developed countries even if this Depression turns out to be a doozey, and the first of many more to come, odds are it won't take us very far down the path of social disintegration. We would like to justify this optimistic opinion using Mr. Orlov's own model.
Orlov's first stage is Financial Collapse: "Financial institutions become insolvent; savings are wiped out, and access to capital is lost." This is what most of the world (China excepted, perhaps having a reprieve for the moment due to its many bubbles) is experiencing at present.
We agree with Orlov that governmental policy is not favourable to arresting this stage, and what will come next is what he terms Commercial Collapse: "Money is devalued and/or becomes scarce, commodities are hoarded, import and retail chains break down, and widespread shortages of survival necessities become the norm."
If hyperinflation takes hold because unsupportable debts are monetised, then this scenario may very well play itself out as Orlov describes it.
On the other hand, if the USA and other rich economies maintain non-hyperinflating currencies, the combined result of unsupportable debts and misguided government policies will be catastrophic loss of household income. Goods may not become scarce, but the means to purchase them will.
In either case, whatever government may decide to do or not do about the situation, the people themselves can arrest Commercial Collapse by any number of actions to ensure the continuing flow of goods and services. The so-called informal economy of legal goods and services delivered 'under-the-table' already provides one template for a popular, self-organising market. Many civic organisations such as churches, clubs, co-ops and farmer's markets can operate as clearinghouses. Barter banks and scrip systems of 'bona fide' money can spring up where they do not already exist. Thus the solution to arresting Commercial Collapse absent highly-unlikely, successful government intervention, is for people to set themselves up very much in community, and to become a lot more creative than they are used to.
We suspect that enough people can rise to the occasion. Only a tiny vanguard of creative types is needed to successfully establish functional patterns of mostly-local commerce.
It should be noted that under this scenario, Commercial Collapse would be arrested at a level of affluence that is only a fraction of what most inhabitants of the World's developed countries are used to. It won't be an easy adjustment by any means. Two classes of persons are most vulnerable: the poorest members of society who lack work and social skills; and affluent members who derive their livelihoods from access to those institutions which are not likely to survive the Commercial Collapse.
Toxic Mortgages and U.S. Social Security
We saw an article (first published 18th November 2009) featured on MSN which got us thinking; the title is "How long can Social Security last?" Reading the article, the answer seems to be "not long at all." It's very interesting that this article was apparently dredged up from the archives and floated once again on MSN, unless it's just that popular.
The article perpetuates the myth of an SS trust fund, stating that the fund will go in the red "in a few years," and be empty by 2037. Oh darn, that sounds unfortunate. But what actually caught our attention was when the article talked about how to fill the 'short-coming' in the 'fund.' The list was as follows:
-Benefit cuts
-Tax increases
-Riskier investments
The first two options are obvious: more money coming in, less money going out, just like our wallet and bank account. The irony of cutting benefits is that inflation is constantly decreasing the value of the SS payouts, but that is beside the matter. We want to dissect the third option: investing the 'trust fund' in riskier ventures.
Given the present, heady atmosphere in the United States Government, we can think of a few exciting places wherein the SS Administration can dump the excess cash it has just sitting around at the office. Now, we have to point out here, that the SS 'trust fund' is actually just money which flows in and out of the U.S. Government's General Fund. In spite of all the accounting shenanigans, in reality the SS cheques are drawn from the general operating budget, as simply any other expenditure.
If the SS 'trust fund' is authorised to be 'invested' in riskier ventures, it will allow the U.S. Government to treat those monies as, effectively, another slush fund. Or, to put it another way, the SS 'trust fund' becomes the SS 'bank, automaker, and whatever-else-Congress-feels-necessary bailout fund.' This can, of course, be dressed up as a good thing: banks and automakers are 'turning the corner,' and will make massive profits to investors; mortgage-backed securities will recoup their value, and then some; credit cards will become profitable again; car loans will be great as the economy turns around; et cetera, et cetera. All these would seem, on paper, to help the SS 'trust fund' close its fiscal gap.
"Surely they won't do that!" you exclaim, dear Reader; "the Government wouldn't put the retirement of millions of Americans on the line to bail out banks and other corporate interests?"
Well, what can we say to that? Frankly, the U.S. Government seems to be constantly doing exactly the worst thing possible during this Depression. From bailing out banks and automakers, to planning on raising taxes via health care 'reform' and other such nefarious plots, we can't see any good moves having been made at all! So, if the SS 'trust fund' were to be allowed to invest in riskier sectors of the economy, where would that investment go but to the arenas which the Government has already been furiously bailing out for two years? We'd be overjoyed to hear other likelihoods, but such corruption as we lay out herein seems inevitable to us. That is, of course, contingent on the SS 'trust fund' being loosened in its restraints.
If the SS 'trust fund' is successfully retooled as a slush fund for banks and automakers, we fully expect to see all other Federal 'trust funds' to be similarly revised. Since all such 'funds' are facing budget shortfalls, brought on by whatever cause(s), such changes can be presented as both necessary, and intelligent. Perhaps even shrewd. Those manoeuvres will be, of course, none of the kind, but rather hopelessly wasteful and economically destructive.
The article perpetuates the myth of an SS trust fund, stating that the fund will go in the red "in a few years," and be empty by 2037. Oh darn, that sounds unfortunate. But what actually caught our attention was when the article talked about how to fill the 'short-coming' in the 'fund.' The list was as follows:
-Benefit cuts
-Tax increases
-Riskier investments
The first two options are obvious: more money coming in, less money going out, just like our wallet and bank account. The irony of cutting benefits is that inflation is constantly decreasing the value of the SS payouts, but that is beside the matter. We want to dissect the third option: investing the 'trust fund' in riskier ventures.
Given the present, heady atmosphere in the United States Government, we can think of a few exciting places wherein the SS Administration can dump the excess cash it has just sitting around at the office. Now, we have to point out here, that the SS 'trust fund' is actually just money which flows in and out of the U.S. Government's General Fund. In spite of all the accounting shenanigans, in reality the SS cheques are drawn from the general operating budget, as simply any other expenditure.
If the SS 'trust fund' is authorised to be 'invested' in riskier ventures, it will allow the U.S. Government to treat those monies as, effectively, another slush fund. Or, to put it another way, the SS 'trust fund' becomes the SS 'bank, automaker, and whatever-else-Congress-feels-necessary bailout fund.' This can, of course, be dressed up as a good thing: banks and automakers are 'turning the corner,' and will make massive profits to investors; mortgage-backed securities will recoup their value, and then some; credit cards will become profitable again; car loans will be great as the economy turns around; et cetera, et cetera. All these would seem, on paper, to help the SS 'trust fund' close its fiscal gap.
"Surely they won't do that!" you exclaim, dear Reader; "the Government wouldn't put the retirement of millions of Americans on the line to bail out banks and other corporate interests?"
Well, what can we say to that? Frankly, the U.S. Government seems to be constantly doing exactly the worst thing possible during this Depression. From bailing out banks and automakers, to planning on raising taxes via health care 'reform' and other such nefarious plots, we can't see any good moves having been made at all! So, if the SS 'trust fund' were to be allowed to invest in riskier sectors of the economy, where would that investment go but to the arenas which the Government has already been furiously bailing out for two years? We'd be overjoyed to hear other likelihoods, but such corruption as we lay out herein seems inevitable to us. That is, of course, contingent on the SS 'trust fund' being loosened in its restraints.
If the SS 'trust fund' is successfully retooled as a slush fund for banks and automakers, we fully expect to see all other Federal 'trust funds' to be similarly revised. Since all such 'funds' are facing budget shortfalls, brought on by whatever cause(s), such changes can be presented as both necessary, and intelligent. Perhaps even shrewd. Those manoeuvres will be, of course, none of the kind, but rather hopelessly wasteful and economically destructive.
Sunday, January 10, 2010
FDIC Bank Failure Report
On 8/01/10, the Federal Deposit Insurance Corporation rang in the New Year closing one bank: Horizon Bank of Bellingham, Washington.The assets of the closed bank were $1,300,000,000 and deposits were $1,100,000,000. The cost to the FDIC is estimated at $539,100,000.
According to our methodology, the recoverable value of the bank was only 43.15% of the declared asset value. This makes the recoverability of this week's closure distinctly below the cumulative recoverability since December of 2007, which stands at 57.63% (down slightly from last report's 57.66%).
Cumulative cost-to-FDIC so far in the Depression was brought to $56,923,690,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $545,760,780,000, and total FDIC-insured deposits to $371,446,650,000. The recoverable value of all failed banks was only $314,522,960,000 (57.63% of the declared value).
* * *
It appears Santa Claus has not fixed the US banking system, after all. This week's closed bank was a particularly putrid affair and we consider it a bad omen for the rest of the year.
The Federal Reserve system laid a sulfurous egg this week too, announcing that bank consumer lending is declining at an 8 1/2 percent annual rate as of November. Revolving credit, primarily credit card lending is declining at a whopping annual rate of 18.5 percent! There is clearly no recovery in bank lending. We suspect that is in part due to the sorry state of household finances, but more so due to the utter insolvency of the banking system as a whole. The credit unions and banks out there that are still solvent enough to lend just cannot pick up the slack from the collapse of the system.
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no account of assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Kansas
5. Minnesota
6. Utah
7. Florida
8. Missouri
9. Oregon
10. Arizona
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (38.89%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.06%)
5. Nevada (49.81%)
6. Washington, up from #9 (50.62% down from 56.18%)
7. Ohio (50.84%)
8. Georgia (54.64%)
9. Utah (55.45%)
10. North Carolina (56.70%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $539,100,000. The value now stands at $39,020,890,000.
According to our methodology, the recoverable value of the bank was only 43.15% of the declared asset value. This makes the recoverability of this week's closure distinctly below the cumulative recoverability since December of 2007, which stands at 57.63% (down slightly from last report's 57.66%).
Cumulative cost-to-FDIC so far in the Depression was brought to $56,923,690,000. These closures bring the total declared assets of FDIC-failed banks (since December of 2007) to $545,760,780,000, and total FDIC-insured deposits to $371,446,650,000. The recoverable value of all failed banks was only $314,522,960,000 (57.63% of the declared value).
* * *
It appears Santa Claus has not fixed the US banking system, after all. This week's closed bank was a particularly putrid affair and we consider it a bad omen for the rest of the year.
The Federal Reserve system laid a sulfurous egg this week too, announcing that bank consumer lending is declining at an 8 1/2 percent annual rate as of November. Revolving credit, primarily credit card lending is declining at a whopping annual rate of 18.5 percent! There is clearly no recovery in bank lending. We suspect that is in part due to the sorry state of household finances, but more so due to the utter insolvency of the banking system as a whole. The credit unions and banks out there that are still solvent enough to lend just cannot pick up the slack from the collapse of the system.
* * *
On the basis of the ratio of bank closures to population (i.e. simply the number of failures in each State, with no account of assets or deposits), the ten most afflicted States are listed here. Only those States which have two or more closures are considered.
1. Georgia
2. Nevada
3. Illinois
4. Kansas
5. Minnesota
6. Utah
7. Florida
8. Missouri
9. Oregon
10. Arizona
The recoverable value represents how much of declared assets are worth by our estimate on the open market. The following are the ten States with the lowest recoverable value; only those States which have had two or more closures are considered in this analysis.
1. Florida (38.89%)
2. Colorado (42.80%)
3. Michigan (43.53%)
4. California (45.06%)
5. Nevada (49.81%)
6. Washington, up from #9 (50.62% down from 56.18%)
7. Ohio (50.84%)
8. Georgia (54.64%)
9. Utah (55.45%)
10. North Carolina (56.70%)
* * *
The Frugal Scotsman's FDIC Cash Burn Through O'Meter gets adjusted with a subtraction of $539,100,000. The value now stands at $39,020,890,000.
Wednesday, January 6, 2010
Some Thoughts on 2010
So we took off the last bit of 2009, and the first bit of 2010, and after coming back to it, we realise we still have nothing in particular to say. That, however, has never stopped us before, so we look forward to another year of fun and games on the world scene, as the 2007 Depression rolls on. Since 2010 is still figuring out which way is up, we thought we'd offer some ideas as to how the year is going to look.
Previously, we called 2009 the Year of the Whinger; boy, were we ever right (insert back-patting here). The banks whinged, and got money; the health insurance companies whinged, and will probably get money; the auto manufacturers whinged, and got money; the home-builders whinged, and got money. Come to think of it, the only people who whinged and were ignored was the Citizenry, of the various countries which forked over said money, who really didn't want all the aforementioned whingers to get all that money. Oh well, they don't know what's best for them, now do they? Don't they know that they need autos, and health insurance, and banks, and home-builders? Why, what would a modern economy look like without these centrepieces of industry? Perhaps they'll learn better.
At any rate, this year, 2010, is certainly shaping up to be quite the doozie, what with the U.S. Treasury removing - not raising, but eliminating - the cap on how much money can be poured into the haemorrhaging enterprises known as Fannie Mae and Freddie Mac. Additionally, justice has been thrust to the side, with a U.S. judge throwing out a murder case against Blackwater agents (i.e. U.S. mercenaries), because the Government prosecutors botched, perhaps purposefully, the case. And the U.S. Transportation Security Administration is hounding a pair of bloggers who published the details of supposedly super-secret security directives. Say that last part ten times as fast.
But what will 2010 be, you ask, dear Reader? Well, we're getting to that. 2009 saw corporate powers across the globe - but perhaps most spectacularly in the United States - with their collective hands out, begging to be kept from going under. At the same time, we see that being the point where those same corporate powers have cemented their control over the Governments which gave them the money, to the detriment of the Citizenry to which a Government is supposedly responsible. This year, we see the fallout of that move start to make itself evident.
Simply put, the moves, for instance, by Goldman Sachs in the U.S., are of such a patently, and odiously, self-serving nature, it doesn't take a genius to figure out the Citizenry has gotten screwed so that Lloyd Blankfein can keep his $43 million a year for doing God's work - oh, we wish we had thought of that one! At the same time, we have a sneaking suspicion that the world markets will take their next big nosedive toward their final destination, which is a 90% drop or so from the peak.
Do you hear what we hear? Yes, the gnashing of teeth: those who got bailouts will grumble they did not get enough bailout; those who will pay for all the bailouts will grumble about how there is already too much slop in the trough. Both sides will be gnashing, and foaming at the mouth; take a look at the latest bailout of GMAC, as an example of what we're talking about. There will be many, many more bailouts, and we would like to be on record as saying this is the year the FDIC will need a direct bailout to keep operating. Ted Butler, we hear, recently stated that 2010 is the year when JP Morgan Chase closes its heart-stoppingly humungous silver and gold short positions; we'd like to put ol' JP on that list of bailouts-waiting-to-happen, too.
Simply put, this will not be a pretty affair, and might indeed result in the civil unrest which James Kunstler and Gerald Celente have been ranting about for about a year already. It could certainly result in the loss of legitimacy of the most bailout-happy Governments, as their respective Citizenry will see continued, extremely unpopular, bailout-age as a sign those Governments are no longer responsible. History has shown that, when Governments no longer seem responsible, they tend to become quite despotic and oppressive, to keep an increasingly restive population under control.
So, we posit two trends: the teeth gnashing on the part of corporate interests, screaming for another series of big bailouts, to ensure their primacy in a depressionary economy; and the teeth gnashing on the part of Citizens, riling against both the previous bailouts, and new bailouts being forced down their throats. Governments will respond to these two, conflicting demands by funnelling vast amounts of money, either directly or indirectly, to their corporate masters; whist simultaneously increasing the bread and circuses for the masses to keep them placated and obedient.
There you have it, then, dear Reader: 2010 is the Year of the Teeth Gnashers. The two different poles of the gnashers - i.e. the Citizenry and the corporate elite - will attempt to pull on Governments to be aligned more strongly with one, against the other. Unfortunately for the Citizenry of the world, they have already lost this fight, probably a long time ago; the corporate interests have the field, as it were. If those interests are smart, which they might or might not be, they will recognise the need to maintain the illusion that Governments are still responsible to the Citizenry, and make token gestures of hollow sacrifice. This, coupled with a sharp uptick in bread and circuses, will likely be enough to keep the Citizenry of the world in check, and docile.
We would like to make it clear, though, that we don't quite see massive civil unrest, a la James Kunstler or Gerald Celente, happening this year. This is not to say the possibility isn't there, of course - the 18th Century French aristocracy assumed the rabble would simply take their lumps, as it were, but those same aristocrats all had their heads chopped off during the Revolution. However, we feel that Governments will be able to maintain the illusion of responsibility to their respective Citizenry through most, if not all, of this year. Next year, 2011, we think all bets are off; we could see that being the year when even major OECD Governments start to loose their aura of faux responsibility.
However, if civil unrest does occur this year, it will likely be in those countries where the Citizenry has a long and noble tradition of taking to the streets. France, Greece, and Italy, for example, are the most likely, in our mind, to see some form of uprising, along with Spain and Portugal. The United Kingdom is a lesser possibility, along with the rest of the core counties of Europa (i.e. Germany, et cetera); Canada, Australia, Russia, and Brasil are not likely to see revolts, as those populations are either relatively docile, or well-policed. The United States, as the most docile and beaten-down country on the planet, will almost certainly not see anything resembling unrest. China, though, is the wild-card, in our mind: it will either have no problems whatsoever, thanks to the famous heavy hand of Communism, or it will completely blow to pieces, taking any mirage of a recovery down with it.
We end with a little tune, sung to Old MacDonald Had a Farm:
Ol' Lloyd Blankfein had a trough,
E - I - E - I - N!
And in that trough he poured some slop,
E - I - E - I - N!
And some slop! slop! here, and an oink! oink! there,
Here some slop, there an oink,
Here some slop, there an oink!
Ol' Lloyd Blankfein had a trough,
E - I - E - I - N!
Ol' Lloyd Blankfein did God's work,
E - I - E - I - N!
...et cetera...
Previously, we called 2009 the Year of the Whinger; boy, were we ever right (insert back-patting here). The banks whinged, and got money; the health insurance companies whinged, and will probably get money; the auto manufacturers whinged, and got money; the home-builders whinged, and got money. Come to think of it, the only people who whinged and were ignored was the Citizenry, of the various countries which forked over said money, who really didn't want all the aforementioned whingers to get all that money. Oh well, they don't know what's best for them, now do they? Don't they know that they need autos, and health insurance, and banks, and home-builders? Why, what would a modern economy look like without these centrepieces of industry? Perhaps they'll learn better.
At any rate, this year, 2010, is certainly shaping up to be quite the doozie, what with the U.S. Treasury removing - not raising, but eliminating - the cap on how much money can be poured into the haemorrhaging enterprises known as Fannie Mae and Freddie Mac. Additionally, justice has been thrust to the side, with a U.S. judge throwing out a murder case against Blackwater agents (i.e. U.S. mercenaries), because the Government prosecutors botched, perhaps purposefully, the case. And the U.S. Transportation Security Administration is hounding a pair of bloggers who published the details of supposedly super-secret security directives. Say that last part ten times as fast.
But what will 2010 be, you ask, dear Reader? Well, we're getting to that. 2009 saw corporate powers across the globe - but perhaps most spectacularly in the United States - with their collective hands out, begging to be kept from going under. At the same time, we see that being the point where those same corporate powers have cemented their control over the Governments which gave them the money, to the detriment of the Citizenry to which a Government is supposedly responsible. This year, we see the fallout of that move start to make itself evident.
Simply put, the moves, for instance, by Goldman Sachs in the U.S., are of such a patently, and odiously, self-serving nature, it doesn't take a genius to figure out the Citizenry has gotten screwed so that Lloyd Blankfein can keep his $43 million a year for doing God's work - oh, we wish we had thought of that one! At the same time, we have a sneaking suspicion that the world markets will take their next big nosedive toward their final destination, which is a 90% drop or so from the peak.
Do you hear what we hear? Yes, the gnashing of teeth: those who got bailouts will grumble they did not get enough bailout; those who will pay for all the bailouts will grumble about how there is already too much slop in the trough. Both sides will be gnashing, and foaming at the mouth; take a look at the latest bailout of GMAC, as an example of what we're talking about. There will be many, many more bailouts, and we would like to be on record as saying this is the year the FDIC will need a direct bailout to keep operating. Ted Butler, we hear, recently stated that 2010 is the year when JP Morgan Chase closes its heart-stoppingly humungous silver and gold short positions; we'd like to put ol' JP on that list of bailouts-waiting-to-happen, too.
Simply put, this will not be a pretty affair, and might indeed result in the civil unrest which James Kunstler and Gerald Celente have been ranting about for about a year already. It could certainly result in the loss of legitimacy of the most bailout-happy Governments, as their respective Citizenry will see continued, extremely unpopular, bailout-age as a sign those Governments are no longer responsible. History has shown that, when Governments no longer seem responsible, they tend to become quite despotic and oppressive, to keep an increasingly restive population under control.
So, we posit two trends: the teeth gnashing on the part of corporate interests, screaming for another series of big bailouts, to ensure their primacy in a depressionary economy; and the teeth gnashing on the part of Citizens, riling against both the previous bailouts, and new bailouts being forced down their throats. Governments will respond to these two, conflicting demands by funnelling vast amounts of money, either directly or indirectly, to their corporate masters; whist simultaneously increasing the bread and circuses for the masses to keep them placated and obedient.
There you have it, then, dear Reader: 2010 is the Year of the Teeth Gnashers. The two different poles of the gnashers - i.e. the Citizenry and the corporate elite - will attempt to pull on Governments to be aligned more strongly with one, against the other. Unfortunately for the Citizenry of the world, they have already lost this fight, probably a long time ago; the corporate interests have the field, as it were. If those interests are smart, which they might or might not be, they will recognise the need to maintain the illusion that Governments are still responsible to the Citizenry, and make token gestures of hollow sacrifice. This, coupled with a sharp uptick in bread and circuses, will likely be enough to keep the Citizenry of the world in check, and docile.
We would like to make it clear, though, that we don't quite see massive civil unrest, a la James Kunstler or Gerald Celente, happening this year. This is not to say the possibility isn't there, of course - the 18th Century French aristocracy assumed the rabble would simply take their lumps, as it were, but those same aristocrats all had their heads chopped off during the Revolution. However, we feel that Governments will be able to maintain the illusion of responsibility to their respective Citizenry through most, if not all, of this year. Next year, 2011, we think all bets are off; we could see that being the year when even major OECD Governments start to loose their aura of faux responsibility.
However, if civil unrest does occur this year, it will likely be in those countries where the Citizenry has a long and noble tradition of taking to the streets. France, Greece, and Italy, for example, are the most likely, in our mind, to see some form of uprising, along with Spain and Portugal. The United Kingdom is a lesser possibility, along with the rest of the core counties of Europa (i.e. Germany, et cetera); Canada, Australia, Russia, and Brasil are not likely to see revolts, as those populations are either relatively docile, or well-policed. The United States, as the most docile and beaten-down country on the planet, will almost certainly not see anything resembling unrest. China, though, is the wild-card, in our mind: it will either have no problems whatsoever, thanks to the famous heavy hand of Communism, or it will completely blow to pieces, taking any mirage of a recovery down with it.
We end with a little tune, sung to Old MacDonald Had a Farm:
Ol' Lloyd Blankfein had a trough,
E - I - E - I - N!
And in that trough he poured some slop,
E - I - E - I - N!
And some slop! slop! here, and an oink! oink! there,
Here some slop, there an oink,
Here some slop, there an oink!
Ol' Lloyd Blankfein had a trough,
E - I - E - I - N!
Ol' Lloyd Blankfein did God's work,
E - I - E - I - N!
...et cetera...
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